February 24, 2006 Bethesda, MD -- A recent report by Dittberner Associates finds that the overall market for public network switches and routers increased by 20% in 2005, to reach $7.3 billion. The study concludes that while the multi-service switch market declined by 5% year-over-year to a little less than $2 billion, the core router market saw 16% growth, while the edge router segment grew by 55%, to become the largest of the three segments.
The report reveals that while Cisco and Juniper remained the leaders in the router segments, posting 16% growth, both companies saw their market shares erode, particularly in the edge router segment. The study sees growth in this segment being driven by a growth in broadband access subscribers, triple play services, and wireless backhaul. In the edge router segment, the firm says that Alcatel and Huawei have moved quickly, capitalizing on their leadership in DSL, to fuel growth in their respective businesses.
The firm notes that these companies' edge router products use MPLS technology to work cost-effectively over either ATM or IP core networks, providing a path for service providers to migrate to all-IP networks, while handling the growth in broadband subscribers. Further, the firm says that Alcatel has seen additional success in aiding service providers with shifting enterprise customers away from Frame Relay and ATM networks, toward IP/MPLS networks. The study finds that this accounts for Alcatel's 2000% growth in revenues between the first and fourth quarters.
Overall, the report concludes that growth in the edge router market will not abate soon.
"The addition of 40 million new DSL subscribers requires another Tbit/sec of bandwidth in the global access network�couple this with the growth in wireless backhaul traffic, and the edge router segment can be expected to outgrow both the DSL and 3G markets over the next five years," contends James Heath, research director at Dittberner Associates. "The core router segment will not see the same kind of growth, both because the equipment will see higher utilization rates, and also because there are alternatives such as MSPPs and ROADMs that will compete effectively with routers in parts of the core network."
The report predicts that edge router market growth will be further spurred by the replacement of legacy ATM based DSLAMs with IPDSLAMs. According to the firm, this growth in ATM DSLAMS has slowed the decline of the multi-service switch segment, but this market is expected to shrink as rapidly as the edge router market is expected to grow. The firm says that Alcatel has positioned itself well for this transition, and interprets Lucent's acquisition of Riverstone's portfolio as an attempt to follow the same strategy. The firm concludes that the growth of the market still provides opportunities for new entrants, while carrying risks for complacent front-runners.
For more about the "Multi-service Switch and Router Markets" report, visit http://www.dittberner.com.